ALMATY – Kazakhstan is preparing to establish a national credit rating agency as part of a broader effort to develop its domestic capital market, but the institution’s success will ultimately depend on more than the creation of a new regulator-approved rating system. Its ratings will have to earn the confidence of investors and become a meaningful part of how companies are financed and risks are priced.
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The new Law On Credit Rating Activities, signed by President Kassym-Jomart Tokayev on July 23, introduces common rules for credit rating agencies operating in Kazakhstan and provides for the establishment of a Kazakh rating agency, with the National Bank among its founders. The law sets requirements for capital, corporate governance, internal controls, conflict-of-interest management and disclosure.
It also expands the potential scope of rating activities beyond conventional credit ratings to include corporate governance, Islamic finance, sustainable development and other types of ratings, while the legislation is set to take effect on Oct. 21, with some provisions coming into force on July 1, 2027.
But the central question is not simply what the new agency will do. It is why Kazakhstan needs one in the first place, and whether it can change the way capital is allocated in the domestic economy.
The gap in Kazakhstan’s capital market
Kazakhstan already has access to the world’s major rating agencies. The new institution is therefore not intended to replace international players or create a domestic version of S&P, Moody’s or Fitch.
Ruslan Sultanov. Photo credit: digitalbusiness.kz
“Creating a national credit rating agency is not an attempt to make a Kazakh equivalent of S&P, Moody’s or Fitch, and certainly not a task of replacing international agencies. International ratings will retain their importance,” a leading Kazakh economist Ruslan Sultanov, who served as Chairman of the Board of the highly respected Economic Research Institute from 2019 to 2024, told the Astana Times.
The rationale is instead connected to the structure of the domestic financial market. Kazakhstan has been seeking to develop non-bank financing, corporate bonds and institutional investment. Yet a functioning capital market requires investors to be able to distinguish between borrowers according to their level of risk.
According to Sultanov, this is particularly relevant for medium-sized companies. An international rating may make economic sense for a large corporate borrower seeking substantial financing or access to international capital markets. For a smaller issuer, however, the cost and requirements associated with obtaining such a rating can become disproportionate to the size of the planned issue.
“As a result, a gap arises: there is a potential issuer, institutional investors have money, but there is often no independent and understandable market assessment of credit risk between them. The national rating scale makes it possible to solve another problem – to compare the credit quality of borrowers within a single jurisdiction in much greater detail than the global scale allows,” he said.
The distinction is important. A domestic rating system does not necessarily need to compete with international ratings. Its value could instead lie in providing more granular information about relative credit quality within the Kazakh market.
Ratings do not create liquidity on their own
A rating is an information tool. It can tell an investor how an independent analyst assesses a borrower’s ability to meet its obligations. But it cannot, by itself, create investors, issuers or demand for bonds.
“The creation of the agency itself will not create a capital market. An agency can be registered, methodologies approved and the first ratings assigned. Liquidity will not appear from that alone,” Sultanov said.
According to him, for the reform to have a broader economic effect, national ratings would need to become integrated into the infrastructure of the financial market: the investment decisions of institutional investors, risk-management systems, corporate disclosure and bond pricing. This means the agency’s real contribution could be measured by what happens after a rating is issued.
The potential benefit for companies and investors
For companies, the most immediate potential benefit is access.
“The main potential effect is a reduction in the barrier to entering the public debt market. This is especially relevant for issuers that do not need an international rating but still need to demonstrate their creditworthiness to investors,” Sultanov said.
For investors, the benefit is potentially greater transparency in comparing domestic issuers. The effect could also extend to banks, which occupy several positions within Kazakhstan’s financial system: they are borrowers, investors and major professional market participants. Over time, national ratings could be incorporated into their investment policies and risk-management systems.
According to Sultanov, they could also potentially be used in elements of prudential regulation if regulators determine that the quality and reliability of the ratings justify such treatment.
The National Bank’s role as one of the founders brings both advantages and potential questions. For investors, the key issue is not simply who owns the agency, but who controls the rating decision.
“The presence of the state or regulator among the founders in itself does not indicate the quality of a rating. For an investor, what matters more is whether the owner can influence the methodology, a specific rating decision or personnel decisions concerning analysts,” the economist said.
Sultanov points to several mechanisms that could help preserve independence: an independent board of directors, an autonomous rating committee, transparent methodologies, conflict-of-interest controls, rotation of analysts, internal oversight and disclosure of the reasons behind rating changes.
The real test will come later
The agency’s credibility cannot be established on the day it receives its registration. It will have to be built through a track record. An important part of that track record will be whether ratings actually correspond to the behaviour of the companies being assessed. Over time, investors should be able to see how frequently ratings are upgraded or downgraded and how often companies in different rating categories default.
“After several years, the market should be able to see rating migration matrices, the frequency of defaults in each rating category and compare the actual behaviour of borrowers with the risk that the agency previously indicated. In other words, measurable quality of the rating,” Sultanov said.
For large Kazakh companies seeking international financing, global ratings are likely to remain important. A national agency, meanwhile, could focus on the domestic market and provide a more detailed assessment of companies whose financing needs do not justify the cost or requirements of an international rating. The two levels of the rating system could therefore become complementary rather than competing.
“A rating agency has a rather unusual asset – trust. It cannot be contributed to the charter capital. It emerges gradually and step by step, when investors see that the same risk receives the same assessment regardless of the owner’s name, the size of the company or its relationship with the state,” Sultanov said.
For Kazakhstan, this may be the defining test of the new system.
